24 February 2006

New Opportunity for ZAP-Produced Urea

ZA Puławy SA are working on a project involving production of AdBlue (32,5% water/urea solution) which is in demand of the automotive industry due to more stringent EU standards regulating emission limits for Diesel engines.

ZA Puławy has for some time been working on the AdBlue project.

The source of relevant information for investors were both our Issue Prospectus and direct meetings with investors when we provided them with information on good market prospects for ZAP-produced urea, says Marcin Buczkowski, President of ZAP’s Management Board. Now we are ready to launch the project. We assume we will start sales of AdBlue by the end of 2006.

On November 13th 2005, the Company commenced the procedure for purchase of a licence for the AdBlue® trademark. In December 2005, a report was prepared at ZAP containing a market analysis, competition assessment, description of the pertaining logistics and legislation, patent study and technical assumptions for the project implementation.

Since October 1st 2005, the newly-homologated lorries must comply with a more stringent standard for exhaust cleanliness (Euro 4, replacing Euro 3), which restricts emissions of nitrogen and soot oxides. Euro 4 will be replaced after three years by an even more stringent standard (Euro 5). Compliance with theses standards entails the use of technology (SCR) which utilises the 32.5% water/urea solution; for a number of decades, this technology has been successfully applied in stationary use in the process of cleaning flue gases at power plants.

The AdBlue production programme at ZAP provides for a two-stage implementation of the project. First batches of AdBlue will be produced by the end of this year.

During Stage 1 we will penetrate and mark our presence on the AdBlue market, explains Mr Buczkowski. In cooperation with our commercial partner, we are now working on organisation of AdBlue sales.

The objective of Stage 2 is to gain a  10 - 15% share in the AdBlue market.

Based on our assumptions, we have prepared an economic and financial study which confirms the high efficiency of the project, assures Mr Buczkowski.

The Company has commenced preparation of capex projects for Stage 1 of the project, which will enable ZAP to launch sales the fully-commercialised product already in the second half of 2006.

AdBlue is a water/urea solution. Its quality and properties are regulated by the DIN-V-70070 standard of August 2003. The highest quality of the solution must be assured not only during its production, but also during transport and storage.

ZA Puławy operates on three key product markets:

• Fertilisers for the agricultural sector (urea, ammonium nitrate, urea-ammonium nitrate solution, ammonium sulphate) – leading Polish and global producer
• Melamine (used in the production of synthetic resin which is applied in the furniture, paint and varnish market, as well as textile and paper sectors) – third largest producer in the world, the only producer in Poland
• Caprolactam (used for the production of textile and industrial fibres, carpeting and engineering resins used in automotive, electronic and food industries) – one of the two producers in Poland.
  ZA Puławy is the largest company in the fertilisers and chemical sector in Poland and an important producer in the world. Approximately half of its revenue is derived from the exports.

For more information please contact:

Marek Sieprawski
ZA Puławy SA
tel. (+ 48 81) 887 62 01
msieprawski@azoty.pulawy.pl